The Dollars and Sense of Higher Education

The American college financial model is broken. The University of San Francisco can no longer rely on the previously successful strategy of yearly tuition increases to fund operations and offset rising expenses, largely because more and more families cannot afford tuition increases that are outpacing inflation by a wide margin. At universities across the country, endowments have been decimated, budgets have been cut, and schools are laying off faculty, eliminating staff positions, cutting salaries, and paring benefits. What does the future hold for higher education and USF? Is there reason to be optimistic? USF President Stephen A. Privett, S.J. offers his insight on what is needed for USF to continue to offer a high-quality, Jesuit education in this changing environment.

Q: You were worried about the impending recession and its effect on USF and higher education before many other university presidents. What did you see? What were the red flags?

A: I wouldn’t claim to be more clairvoyant than any other university president, but I do think we identified the trouble early and prepared ourselves to act quickly, and that served us well. We realized that if the economy collapsed and unemployment grew, people’s capacity to finance a college education would be diminished. When the market fell, so too did the value of our endowment, and we took a $2.9 million hit to our budget for financial aid. We had to rally to make budget adjustments to make up for that lost endowment-funded support.

As the economy deteriorated, more and more students started asking for greater financial help. That’s when we launched the Keeping Faith with Students campaign that brought in more than $1.4 million for scholarships and financial aid from the generous contributions of faculty, staff, and alumni. We also launched a USFcares hotline, and more than 400 families contacted us to explore ways to keep their sons and daughters at USF.

Q: The domestic and global economy continues to experience serious challenges. What are the greatest challenges you feel still face higher education?

A: The overarching challenge for higher education is to be able to deliver a high quality education at a lower cost, and this cuts across both public and private universities. It is important that people see a college education as a public good, because it’s the educated person who provides the kind of innovation that creates the businesses that employ the people who drive the economy. Also, the foundation of democracy is an educated and engaged public. So, this is not just about preserving USF. This is about continuing to provide society with the people who make society work and make it work better. This is a critical public policy issue to secure the well-being of the country economically, politically, and morally.

Q: How is USF doing compared to its comparator schools?

A: If we’re going to compare USF to other institutions, we have to distinguish between the privates and the publics. UC is one of our main competitors for students, but UC has a completely different set of issues because UC depends on allocations from the state legislature for a significant portion of its budget, whereas our primary source of revenue is tuition. Compared to other tuition-driven institutions, I think we are doing very well.

Q: USF has moved aggressively to trim its budget and be more efficient. What steps has the university taken to reduce costs?

A: Cutting costs and operating more efficiently are only part of the story. I have also challenged the deans to create new and exciting academic offerings that increase revenue. Already, we have developed new master’s programs in public affairs and practical politics, international studies, risk management, investor relations, business economics, a joint master’s program in global entrepreneurship and management, as well an an executive doctor of nursing practice program.

As far as reducing expenses, regrettably, we have eliminated some staff positions (fewer than 20). We’ve frozen the salaries of the executive officers, curtailed travel, increased class size, limited on-campus catering, created a policy that more tightly regulates university-issued cell phones, and moved from a three-year computer replacement cycle to a four- or five-year replacement program. You could argue that these were efficiencies that should have been in place before, but we’ve really taken a look at all parts of our business operation to see if we can still deliver a Jesuit-based quality education, with the quality of service our students deserve, while being more bottom-line conscious.

Q: Once the economy improves, won’t things return to normal?

A: Unfortunately, no. There is a widespread misconception that if the economy gets better, we’ll return to the way things were. The reality is that the way we do business has changed dramatically and irrevocably. We can never again rely on large tuition increases to fund our operations. Demographics don’t lie. We know that the number of traditional-age college students is in decline and that their families have less capacity to pay the costs of a private college education. Given that college costs have increased far more than the CPI over the past decade, Congress intends to cap tuition increases. Trends show that the students USF attracts need greater amounts of financial aid; right now the biggest claims on our budget are compensation and financial aid. An improving economy will increase the value of our endowment and generate some additional revenue, but the challenges of rising costs and decreasing net tuition revenue will not be resolved by an improved economy.

Q: With the efficiencies you’ve mentioned now in place, what is the state of financial affairs at USF?

A: We have effectively stabilized the short-term financial base of the institution and we’re now in the position to consider the strategic moves that we need in order to ensure our long-term presence and effectiveness.

The overarching challenge we face is, ‘How are we going to deliver a quality education at a much lower cost?’ We know that only 10 percent of college-bound students can afford the $50,000-plus cost of a private education. Our costs—and the costs at most Jesuit universities—are significantly above average. The demographics tell us that in the next 20 to 30 years, students will come from families that have less capacity to meet the costs of an education at a private institution. That will require an increase in university-funded financial aid.

And, as I said, we know that we are not going to be able to increase tuition at the rates we are accustomed to. There simply are not enough people who can afford it any more, and the federal government is going to regulate the rate of tuition increases one way or another, either by legislation or by sanctions. So, if our tuition increases are going to be lower, we must decrease our costs accordingly. If we don’t succeed at that, then you don’t need to be an economist to know that we are headed for trouble.

We’re going to become even more focused on international recruiting, especially in Asia. We’re going to look to develop partnerships with other universities in Asia where students might do a year in Asia and three years at USF. The international market represents a rich and insufficiently tapped source of bright graduate and undergraduate students, as well as an important component of the global perspective that USF offers its students.

Q: You talked about ways to bring in more revenue, but what about the impact of the quality of a USF education?

A: The important thing is the mission of the university. We’re not about making money. We’re not about self-preservation. We are about offering a high-quality education that prepares our students to have a positive impact on society. The future needs exactly the kind of people that USF educates: smart and compassionate people with a global sensitivity.

Q: Does the makeup of our student body present more of a challenge for USF to weather this recession?

A: Is it an economic challenge? Yes. About 33 percent of our students are the first in their families to attend college and approximately 33 percent of this year’s freshman class qualify for Pell Grants, which means that their families earn less than $30,000 per year, which is less than the cost of our tuition.

Is a diverse student body an educational advantage? Absolutely. We have a diverse mix of students, both ethnically and economically, who bring with them a perspective that is quite distinctive in higher education. Education doesn’t occur only in the classroom, students also learn from each other. The richer the diversity of the student population, the richer the overall learning experience.

Q: Why doesn’t USF just admit more students who can afford to pay full tuition?

A: Fewer students are able to pay the full cost of a college education, and more than 4,000 schools are competing vigorously to attract that small number of students who can pay full price. We don’t want the standard to become simply a person’s capacity to pay. That’s not compatible with our mission. We want to admit students who will benefit from kind of education we offer. We want to admit students whose minds and hearts are set on changing the world.

Q: The credibility of higher education has taken a hit recently. How do universities regain that trust?

A: Higher education certainly needs to reestablish its credibility with the public at large. We need to be able to show that tuition dollars are well spent, and that the investment is worth it in terms of what people learn, the knowledge and skills they acquire, the kind of life they live, the level of satisfaction they enjoy, and the contribution they make to society. When we say that USF educates leaders to fashion a more humane and just world, we must show that that’s actually what we do. The value of a higher education is undeniable. It is the only investment a person makes that can never be taken away from them, and its value only increases over time.

Q: Are USF students satisfied with the quality of their education?

A: The answer is a resounding “Yes!” In our survey of the most recent graduating class, 93 percent agreed or strongly agreed that they were satisfied with their USF education, more than 96 percent said their instructors took an active interest in their learning, and more than 95 percent said their instructors were reasonably accessible outside of class. This extremely high satisfaction rate has been relatively consistent during the 20 years we have conducted the survey. More than 1,700 graduating students replied to the latest survey, which is an astonishing response rate of 98 percent.

We also have external validation of the high-quality of our education: Our pre-med students are accepted to medical school at a rate far exceeding the national average, 67 percent versus the national average of 45 percent. In natural sciences, the number of USF students who go on to earn doctorates is twice the national average. We were just recognized by the Chronicle of Higher Education as one of the top 22 national research institutions in the number of Fulbright Scholars we produce. And, just this semester, we were re-accredited by WASC* for 10 years. That is the longest re-accreditation time possible, and is compelling evidence of our academic success.

*WASC, the Western Association of Schools and Colleges, is one of six regional associations that accredit public and private schools, colleges, and universities in the United States. Its accreditation is an acknowledgment of a school’s effectiveness and quality.

Q: A recent survey from the Center for Public Policy in Higher Education found that 60 percent of respondents think that colleges focus mainly on the bottom line. How would you respond to that 60 percent?

A: We’re very clearly a mission-driven institution, but it would be naïve to think we can pursue that mission if we aren’t financially stable. We need to be responsible stewards of our resources. People are giving us their money and their sons and daughters and they have expectations that we will give them a rigorous Jesuit Catholic education that is socially responsible. We can’t do that if we’re not financially responsible.

Q: Are you optimistic about the future of USF?

A: I’m extremely optimistic. Our Jesuit educational roots reach back to the sixteenth century. The deeper the roots, the more sturdy the tree in the face of the most punishing winds. We have talented, dedicated colleagues, from our faculty in the classroom to the staff who make the university function on a daily basis. We have a wonderfully dedicated and involved board of trustees. Plus, we are adapting swiftly to the changing economic climate. Let’s not forget the recent building projects we’ve completed, such as Kalmanovitz Hall, our new home for humanities and social sciences, and our plans for the new Center for Science and Innovation, which will provide a new home for the sciences and new community space that will transform the heart of our campus. We have a lot of momentum going forward to meet today’s challenges. Jesuits have been in education for almost five centuries. We’ve been through many situations more challenging than this. We had every one of our schools closed and confiscated in the 18th century. We’ve died and risen again. We come from very sturdy stock. My optimism is well-grounded in a 450-year history of success.